Advice from private landlords on set up

destroyedbyabundance

Hi all,

Using a new profile as I can't access my old account but I'm new to the rental boards after years on debt-free and mortgages instead. Situation has changed a little over the last few years and I am hoping to get some advice for my mum and myself on whether what we are looking at is reasonable/will be affordable for her.

Backstory:

I owned a property but had to sell and leave. I have nothing left from this sadly.

My mum own a house outright, which includes an adjoined annexe with separate council tax that my grandparents used to live in until they sadly died. They owned the land and outbuilding I was hoping to buy but the sale of my property cost me that dream sadly so that has now been sold. A whole separate backstory here re. division of land that has caused huge issues.

Around the time I moved back to my mums, my brother also sadly split with his fiance so we have been sharing the annexed property - my son has been sleeping next door with my parents.

My savings from house sale are gone and I have been trying to claw back some form of career with not much luck since the end of 2021. I receive Universal Credit but obviously as this is my parents house I have not been eligible for any housing support. I now owe my mum lots of money.

My brother has now decided he wants to buy a home with his girlfriend and it looks like this could move quite quickly. My mum and dad will lose his rental money and my dad has cancer (palliative) so they are considering the need to evict me so they can charge rent on the property.

I have therefore started to discuss with my mum about setting up a formal tenancy agreement so that whilst I am trying to repair my career and earnings, I can at least start contriubuting to the housing costs via Universal Credit support that I can't currently claim.

My parents are not at all wealthy - they are on basic state pensions and struggle as it is with upkeep so having a rental income at proper market rate (2 bed beautiful countryside home with drive, garages and garden) would be a huge weight off their mind. They are obviously nervous about having to deal with tax bills etc. at their age so I want to be able to help them with assessing whether renting to me is a more viable option for them as I'd then be able to help with this.

What I'd like to know:

1. With Universal Credit, presumably the specification that they won't pay toward housing if you live with parents excludes separately taxed properties? This has its own council tax. All I've been told is that they won't pay if living with parents but an annexe on its own tax seems like it could be seen separately?
2. What would we need to do to formerly kick things off if they were to create a tenancy agreement? I'm aware there are template contracts and guides online but as this is an annexed property I just want to be sure the same conditions apply:
   1. electric and gas safety certificates?
   2. a deposit holding scheme (how much do these cost to the landlord?)
   3. landlord insurance? What is a potentially reasonable cost here? If I were living there with formal tenancy, is there a bare minimum payment version as quite honestly I imagine I'd be doing a lot of the upkeep stuff anyway
   4. EPC
   5. Fire and carbon monoxide - we already have these
3. Apart from standard tax (they are basic state pensions so it looks like on a possible of 1k per month rental, which is far below what they could get locally if rented to someone else) they would be paying around 800 and 1200 each here - are there any other costs associated in taxes for landlords that I may not have come across?

Anything else I may not have come across yet?

Appreciate it may be tricky to answer re. the universal credit elements but I know many of you will deal with your tenants paying this way. It's all been a bit of a nightmare in terms of trying to explain that whilst I live "with" parents, it is separate council tax to pay for and they are pensioners that can't sustain the costs of a thirty nine year old whose life ended up down the toilet.

Many thanks

RedFraggle

Does this help?

https://england.shelter.org.uk/housing_advice/benefits/claiming_benefits_if_you_rent_from_family

saajan_12

https://forums.moneysavingexpert.com/discussion/6674788/advice-from-private-landlords-on-set-up

My mum and dad will lose his rental money and my dad has cancer (palliative) so they are considering the need to evict me so they can charge rent on the property.

…

My parents are not at all wealthy - they are on basic state pensions and struggle as it is with upkeep so having a rental income at proper market rate (2 bed beautiful countryside home with drive, garages and garden) would be a huge weight off their mind. 

..

Apart from standard tax (they are basic state pensions so it looks like on a possible of 1k per month rental, which is far below what they could get locally if rented to someone else) they would be paying around 800 and 1200 each here - are there any other costs associated in taxes for landlords that I may not have come across?

If they need the rental income, why don't you look for a separate smaller rental elsewhere where the market rent matches what you can afford and they rent to someone who would pay full whack? That way there's no question on whether its a legitimate tenancy or contrived, given its the same property which you haven't paid for all this time and owned by parents, adjoined to their land/property.

Does it really help them to pay much less than the market rent?

FlorayG

Please clarify; your brother paid rent for the property but shared it with you and you paid nothing is that correct?

If so then he is giving up the tenancy and you can sign a new agreement. I'm assuming the insurers already know that it is rented to family?

If it is rented to your brother, all the legalities you mention; safety certificates, insurance, tax liability etc. should all already be in place so your question is a bit confusing

silvercar

Starting point, actually before you start, look up the maximum that can be claimed for the housing element of universal credit in your area. If that is below what the property could fetch on the open market, your parents would be far better off renting it out to someone who would pay market rent and you rent somewhere that you can afford or within benefit levels if you need to claim.

mlz1413

If you rented somewhere with your son I assume that would make you eligible for housing benefit. Plus on a low income you would still get universal credit.

As others have said renting the separate building for market value would benefit your parents.

So as long as it benefits them not to have live next door and your son live with them then everyone should be better off.

Get a local agent round to value the property and explain what you need, as it could take a couple of months to get all the certificates you not (if they are not already in place).

Mostly the 1st month of rental income is swallowed up in fees so if money is tight then quicker you start the better.

destroyedbyabundance

Thanks all.

Just to clarify - my parents didn't have a tenancy with my brother. He just contributed towards all the bills, as these come through as a whole, and my mum always took a bit extra on top (I am aware she shouldn't have been doing that, by the way). It was more a case of he had nowhere to live (as with myself), so they put him up after my grandparents passed away and just asked him to pay towards the bills. He earned enough to cover this, so there was no rent as such. He paid the council tax in full for the annexe we are in.

I was paying and then lost my job, so they haven't asked for anything since. Now he is leaving, the conversation about renting has come up, with the options being that I go and they rent at market rate, or I stay and they rent to me, but with a tenancy in place so I can claim support whilst I'm trying to increase my hours back to a salary that can cover this (currently I'm working part-time night shifts).

It is my mother who said she would prefer I stay. I said she could ask that we leave and write a letter to the council stating they cannot afford for me to stay without paying market rate (this will be what happens if I can't legitimately set up a tenancy agreement anyway).

At the moment I am the only person she really sees, and my dad has cancer. I also cook a few times a week for her, so she would rather it was myself and her grandson next door than a stranger. They aren't in a position to cover what my brother paid towards the bills, plus the share of mine they are already covering.

The only reason this hasn't come up before is because it was where my grandparents lived, and they paid half. The last of them died after moving to a home shortly before my brother moved back.

The alternative is for my parents to sell, but they really aren't that keen given Dad has cancer and would like to stay in their home. They have said they can survive on less than market rate if it means me staying, but it's more than I have right now.

Seems daft if it wouldn't be possible, as it's a separate council tax but joint bills. Presumably, if they rented to a cousin or aunt, etc., then the living with parents clause wouldn't matter.

FlorayG

If the council tax is separate the bills should also be; the annexe should have it's own meters.

Regardless of that, I think you can claim to have been your brother's lodger; he rented the annex, you 'rented' a room from him. If you paid him nothing, that's between you and him. Now he's leaving, you want to become the tenant and claim housing benefit.

Your brother is legally the tenant whatever the informal agreement and all the legal requirements of being a landlord need to be in place. If he was giving your parents money this is income that should be declared

silvercar

This is going to be a painful claim, with no clear outcome. It relies on the benefits people accepting that renting from your parents is a genuine tenancy. It is complicated by the fact that previously there wasn’t a clear tenancy as your brother seemed to pay some combination of keep/ board/ contribution to costs rather than a clear rental agreement. The fact that your parents didn’t declare a rental income on their tax returns (and I’m not criticising this in any way, it is often the way that families operate) tends to point that this will be the first formal tenancy on the property. As such the benefit assessors may be reluctant to accept it as a formal tenancy, given you are related. It sounds like you are relying on getting the housing element of universal credit in order for all the numbers to add up and I don’t think you can rely on this happening in advance.

Alex_thompson

https://forums.moneysavingexpert.com/discussion/6674788/advice-from-private-landlords-on-set-up

From the property management side, I’d make sure the tenancy is properly documented from the start and check what requirements apply to the annexe, including safety checks, EPC, insurance and any deposit arrangements.

For the Universal Credit side, I wouldn’t want to guess based on the separate council tax. I’d get that confirmed directly before setting anything up, as the family relationship and the annexe arrangement could make a difference.

WIAWSNB

DbA, may I ask how old your son is, and where does he sleep in your parent's house? How many bedrooms in that house - any spare rooms of any description?

Your mum, understandably, prefers having you, and I presume her grandson, around at this difficult time, but it currently doesn't give them any financial headroom. I'm guessing the market rental for this annex could be a significant help to them - would it approach £1k pm?